Current success of department stores may be model for dealers

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The so-called experts who declared the venerable department stores dead must be wiping off egg right now. With the June retail sales numbers in, overall retail dropped 0.5 percent. This followed an even steeper drop of 1.1 percent in May. This was all “expected.”

What wasn’t expected, however, is that department stores appear to be doing much better than the averages. While consumers are clearly still guarding their checkbooks, stores like Nordstrom, Macy’s and others are surging ahead.

Department stores were hurting this time last year so the comparisons look pretty good. Specifically, Nordstrom set a hot pace with its sales rocketing up 19.8 percent and, most important, its same-store sales up 14.1 percent. That was the highest of all reporting department stores. Macy’s reported a 6.5 percent increase, Kohl’s weighed in at 5.9 percent, JCPenny up 4.5 percent and Saks rose 2.2 percent, rounding out the top five. How are they doing it?

Let’s look at the leader. For one thing, Nordstrom has stayed true to its belief that consumers will go for luxury. Apparently they’re right, but the times now dictate luxury be presented as a value proposition. Unfortunately, it has become almost automatic that we now associate value with discounting. We’re told we’re seeing consumers moving down to “bargain’ retailers – the “new normal” as they say. Not necessarily!

Nordstrom is successfully protecting its trademark image of offering high quality products, thus keeping its customers who still have the income and want chic topped with indulgent service. Realizing customers will buy luxury products when they are presented to them as a value has prompted Nordstrom to use a variety of promotional events such as its big ladies and kids sales event, online and catalog promotions. In fact, online and catalog sales in the first quarter this year rose 39 percent. So Nordstrom is successfully promoting to customers in a variety of ways.

Interestingly, at the same time, Nordstrom has calculated that its customer base now includes many who, because of the economy, must be more frugal than before. So, Nordstrom has expanded its outlet stores division. The strategy is aimed squarely at keeping those long-standing customers who must buy down still buying from Nordstrom.

And, there’s an added bonus, too. It attracts new customers who want the prestige of Nordstrom, even if they aren’t in a position to pay main store prices. It also puts Nordstrom in a strong position to gain market share.

Most analysts now think the department store sales gains are not an aberration. Rather, it could be that this Great Recession has taught them to employ a multifaceted approach to promoting sales events and targeting the old customer base. Moreover, gains in market share are being realized by serving multiple levels of customers in new ways. It’s all something worth looking at for our retail boating businesses, too.

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